Pattern Dragon davolno common in the forex market and other financial markets and allows traders familiar with graphical analysis successfully get by knowing all the details of construction and further development of graphical models, the desired profit.
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In technical analysis, forex recognition of different patterns is defined as the process by which traders «recognize current events, while identifying certain predictable pricing model.»
Although the patterns forex rarely repeated on the same level of trade or in the same time intervals, but still there are patterns that repeat themselves in certain ways and certain sequences.
Ability to recognize such patterns and trade according to certain rules on the data chart patterns can help you become a successful trader forex. In this case, the successful recognition of graphical models and trading on it shall consist of an initial reference point and the basic rules of the trading methodology. This forex strategy, we consider one of the patterns, called «Dragon», and justify the basic rules of trading this pattern forex.
Forex market rarely moves from bearish to bullish status and opposite (except for V-bottoms and a V-vertex), without some sort of series of price trends, in which the tested generated support and resistance levels. The basis of the pattern, «Dragon» as are such pivots and gives us a good method for making deals for them.
Pattern of «Dragon» can be found at all time intervals and on all currency pairs.
The graphical model of the «Dragon»:
Pattern of «Dragon» is very similar to the pattern or W pattern «double bottom«, but he has a few distinctive rules and targets. Accordingly, the inverted pattern of «dragons» are similar to the pattern of M, or «Double Top».
«Dragons» is very often appear on the market about the market bottoms. As well as «double bottoms» patterns «dragons» represent a superb opportunity to open trade with low risk in relation to the possible profit potential.
Pattern of «Dragon» begins the formation of the «head», then the price on the chart is reduced, and thus forms a 2-ve «dragon claw». Very often the difference between the data with 2 feet of 5 -10%. At the 2 nd leg formed a signal for the market reversal - a reversal bar or divergence with oscillators (eg MACD, RSI, Stochastics, etc.) The increase in transactions, which follows the rotation of market prices, is also a good sign of a reversal. In forming the pattern, we can draw a trend line from the «dragon head» to his «hump».
Once the price closes above the trend line, and we thus get a graphical confirmation (or obtain confirmation of the above oscillator), then so it is a signal of trend reversal. 2-m forex confirmation of this pattern is closing prices above the level of the resulting «hump», which represents the maximum oscillation between the two resulting «legs dragon.»
The structure of the pattern, «Dragon»:
A — «dragon’s head»
B — «The first leg of the Dragon
C — «Hump the Dragon» (must be within 0.38 — 0.5 of AB)
D — «The second leg of the Dragon» (tends to be 0.618 or 1.27 from the AB)
E — Break formed trend line (the signal to open a trading position to buy)
F — The first profit target — 1.27 CD
G — The second profit target — 0,886 — 1.0 Sun
H — The third goal of profit — 1.38 AB
I — safety stop-loss orders must be placed a few ticks below the lowest minimum of two feet of the dragon.
In Figure 3 you see a pattern, «Dragon» 30-minute price chart (M30) futures Dow E-mini. January 3, 2007 market price formed a «dragon head». After that, the price dropped to 8 January, until, until it was formed the first leg of the Dragon. January 8 was an attempt to restore to the price level of 12,520. Then we can draw a trend line connecting with the top of a dragon’s head and top of the first leg of Dragon. And on January 10 was formed the second leg of the Dragon, the price chart retraced from the top of the hump to the level of the Dragon 12420. Final confirmation of the formation of a pattern, «Dragon» was closing market prices over the line formed by the trend level of about 12,500.
1. Open trading position to buy at the price of 12520 at the closing price over the maximum of the breakdown bar.
2. Profit target — 1-th vibrational peak prior to the foot of the Dragon (1) at 12,570 and the area «a dragon’s head at the level of 12,640.
3. Place a safety stop-loss order under the lowest low-educated 2-foot level near 12,410.
Inverted pattern of «Dragon» is reminiscent of a «double top.» The terms of trade are the same as for the direct pattern, «Dragon». «Hump dragon» is often formed at a distance of 38-50% of the «dragon head» of up to 1 st of his legs. Closure of the candles formed under the trend line generates a signal to enter into trading positions. Closure of the candles formed below the hump once again confirms the formation of a pattern, «Dragon» and gives another signal for the deal to sell.
1. Should open a trading position on the market under the trend line formed.
2. Profit target — a minimum of swing, which precedes the first «foot dragon.»
3. Should place a safety stop-loss order above the high of the second leg dragon.
Conclusions on the pattern of forex «Dragon»:
Patterns of Dragon represent a variant of 2-tops and double bottoms. These patterns allow us to find the forex trader the important turning points in the forex market and predict the transition from one trend to the opposite. Although graphical models «dragon» is found davolno rarely at the daily and weekly charts of price charts, they are very often found at smaller time intervals, and trade on these patterns gives a great chance to conclude it was a lucrative deal. Also, you can add to the additional indicators forex for greater reliability in trade on it.